Berkshire Income Realty Announces Year End Funds from Operations of $10,443,094

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Berkshire Income Realty Announces Year End Funds from Operations of $10,443,094

BOSTON--(BUSINESS WIRE)-- Berkshire Income Realty, Inc. (NYSE Amex Equities: "BIR_pa"), (NYSE Amex Equities: "BIRPRA"), (NYSE Amex Equities: "BIR-A"), (NYSE Amex Equities: "BIR.PR.A") ("Berkshire" or the "Company") reported its results for the year ended December 31, 2012. Financial highlights for the year ended December 31, 2012 include:

- The Company's Funds From Operations ("FFO") grew approximately 6.9% for the year ended December 31, 2012 - The Company's FFO, a non-GAAP financial measure, for the year ended December 31, 2012 was $10,443,094 compared to $9,766,693 for the year ended December 31, 2011. Solid gains in rental revenue and lower interest expenses helped drive the Company's FFO growth.


- Same Property Net Operating Income ("Same Property NOI") increased approximately 6.7% - Same Property NOI, a non-GAAP financial measure, increased as a result of growth in revenue for properties acquired or placed in service prior to January 1, 2011 ("Same Property"). The Same Property portfolio had a total revenue increase of approximately 4.7% for the year ended December 31, 2012 compared to the same period a year ago. Strong revenue growth outpaced increases in operating expenses for the Same Property portfolio.

- A presentation and reconciliation of net income (loss), the most directly comparable financial measure, calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), to FFO and Same Property NOI, is set forth on pages 2 and 3 of this press release. For the years ended December 31, 2012, 2011 and 2010, the net income (loss) was $29,021,154, $1,922,299 and $(25,726,511), respectively.

- Development Activities - The Company owns interests in three development joint ventures, of which two were nearing completion at the end of 2012 and the third was progressing through the regulatory entitlement process. The 2020 Lawrence development, a mid-rise, 231-unit LEED-gold certified multifamily building, located in downtown Denver, Colorado, has been well received by the market and leased its first units in late December 2012. The Trilogy NoMa development is a three building multifamily community in downtown Washington, DC, and also leased units as of the end of 2012. The lease up of both projects is ongoing and substantially in line with operational forecasts. The Walnut Creek development, located in Walnut Creek, California, is nearing the completion of the regulatory and environmental entitlement processes. Start of construction activities is anticipated to begin in late 2013.

- Economic Conditions - During 2012, on a national basis, the multifamily sector continued to exhibit strong fundamentals and improved performance due to sustained increases in rents and stable occupancies resulting from continued favorable apartment unit supply and demand dynamics. Decreased levels of new units constructed, as well as reduced home ownership rates driving demand in the apartment sector have contributed to a 10-year low in the national vacancy rate. Capital markets improvements have had a favorable impact on sales of multifamily assets with transaction volumes reaching five-year highs in the third quarter of 2012. With the continued improvement in the economy, the Company was able to continue to implement its operating model and continue to grow rental rates in select sub markets that exhibited positive indicators.

President David Quade comments: "The fourth quarter was highlighted by strong operating results, successful sales and related gains, as well as the continued progress of the Company's ongoing development projects.Gains from the sale of five assets contributed significantly to the positive results of Berkshire in 2012, which included nearly a 7% increase in net operating income for the Same Property portfolio.The success of 2012 has positioned the Company for future growth as the development projects continue to lease up and contribute to the operations of the Company."

Funds From Operations

The Company has adopted the revised definition of FFO adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission (the "SEC"). Management considers FFO to be an appropriate measure of performance of an equity Real Estate Investment Trust ("REIT"). We calculate FFO by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items), for gains (or losses) from dispositions of properties, impairments, real estate related depreciation and amortization, and adjustment for unconsolidated partnerships and ventures. Management believes that in order to facilitate a clear understanding of the historical operating results of the Company, FFO should be considered in conjunction with net income (loss) as presented in the consolidated financial statements included elsewhere herein. Management considers FFO to be a useful measure for reviewing the comparative operating and financial performance of the Company because, by excluding gains and losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or to different companies.

The Company's calculation of FFO may not be directly comparable to FFO reported by other REITs or similar real estate companies that have not adopted the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO is not a GAAP financial measure and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP, as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance; FFO should be compared with our reported net income (loss) and considered in addition to operating cash flows determined in accordance with GAAP, as presented in our consolidated financial statements.

The following table presents a reconciliation of net income (loss) to FFO for the years ended December 31, 2012, 2011 and 2010:

  Year ended December 31,
2012  2011  2010
Net income (loss)$29,021,154$1,922,299$(25,726,511)
Add:
Depreciation of real property23,165,63524,819,89824,615,373
Depreciation of real property included in results of discontinued operations1,575,9793,006,6463,449,495
Amortization of acquired in-place leases and tenant relationships68,280531,42244,550

Amortization of acquired in-place leases and tenant relationships
included in results of discontinued operations

8,91673,298
Equity in loss of unconsolidated multifamily entities268,9213,430,0154,080,225
Funds from operations of unconsolidated multifamily entities, net of impairments941,7891,286,493860,673
Less:
Funds from operations of noncontrolling interest in properties(1,015,799)(1,322,049)(1,044,553)
Gain on disposition of real estate assets(43,582,865)(23,916,947) 
Funds from Operations$10,443,094 $9,766,693 $6,352,550 

FFO for the year ended December 31, 2012 increased as compared to FFO for the year ended December 31, 2011. The increase in FFO is due primarily to the increased revenue, lower interest expenses as a result of reduced revolving credit facility balance outstanding, and transaction costs for the acquisition of Estancia Townhomes of $620,779 incurred during the year ended December 31, 2011 for which there was no comparative expense recorded in 2012. The increase was partially offset by higher incentive advisory fees and losses from discontinued operations during the year ended December 31, 2012 compared to the same period in 2011.

Other Non-GAAP Measures

The Company believes that the use of certain other non-GAAP measures for comparative presentation between reporting periods allows for more meaningful comparisons of the periods presented.

Same Property NOI falls within the definition of a "non-GAAP financial measure" as stated in Item 10(e) of Regulation S-K promulgated by the SEC and should not be considered as an alternative to net income (loss), the most directly comparable financial measure of our performance calculated and presented in accordance with GAAP. The Company believes Same Property NOI is a measure of operating results that is useful to investors to analyze the performance of a real estate company because it provides a direct measure of the operating results of the Company's multifamily apartment communities. The Company also believes it is a useful measure to facilitate the comparison of operating performance among competitors. The calculation of Same Property NOI requires classification of income statement items between operating and non-operating expenses, where operating items include only those items of revenue and expense which are directly related to the income producing activities of the properties. We believe that to achieve a more complete understanding of the Company's performance, Same Property NOI should be compared with our reported net income (loss). Management uses Same Property NOI to evaluate the operating results of properties without reflecting the effect of capital decisions such as the issuance of mortgage debt and investments in capital items; in turn, these capital decisions have an impact on interest expense and depreciation and amortization. The Same Property portfolio consist of 20 properties acquired or placed in service on or prior to January 1, 2011 and owned through December 31, 2012.

The following table represents the reconciliation of GAAP net income (loss) to the other non-GAAP measures presented for the years ended December 31, 2012, 2011 and 2010:

  Year ended December 31,
2012  2011  2010
Net income (loss)$29,021,154$1,922,299$(25,726,511)
Add:
Depreciation25,642,06427,694,55127,321,332
Interest, inclusive of amortization of deferred financing fees24,716,86426,827,06124,604,555
Amortization of acquired in-place leases and tenant relationships68,280531,42244,550
Net income (loss) from discontinued operations(42,068,782)(24,519,249)482,755
Equity in loss of unconsolidated multifamily entities268,921 3,430,015 4,080,225 
Net operating income37,648,50135,886,09930,806,906
Add:

Net operating income related to properties acquired or placed in
service after January 1, 2011 and non-property activities

4,653,148 3,740,976 7,178,832 
Same Property net operating income$42,301,649 $39,627,075 $37,985,738 

The Company

The Company is a Real Estate Investment Trust ("REIT") whose objective is to acquire, own, operate, develop and rehabilitate multifamily apartment communities. The Company owns interests in twenty-one multifamily apartment communities and two multifamily development projects, of which six are located in the Baltimore/Washington, D.C. metropolitan area; four are Houston, Texas; three are located in Dallas, Texas; three are located in Virginia; and one is located in each of Austin, Texas; Atlanta, Georgia; Sherwood, Oregon; Tampa, Florida; Philadelphia, Pennsylvania; Walnut Creek, California; and Denver, Colorado.

Forward Looking Statements

With the exception of the historical information contained in this release, the matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements about prospects for the Company's ongoing development projects, apartment rental demand and fundamentals, involve a number of risks, uncertainties or other factors beyond the Company's control, which may cause material differences in actual results, performance or other expectations. These factors include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, especially as they may affect rental markets, legislative/regulatory changes (including changes to laws governing the taxation of REITs), possible sales of assets, the acquisition restrictions placed on the Company by its investment in Berkshire Multifamily Equity Fund, LP, availability of capital, interest rates and interest rate spreads, changes in accounting principles generally accepted in the United States of America and policies and guidelines applicable to REITs, those set forth in Part I, Item 1A - Risk Factors of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and other risks and uncertainties as may be detailed from time to time in the Company's public announcements and SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update such information.

    
BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED BALANCE SHEETS
 
December 31,
2012
December 31,
2011
 
ASSETS

Multifamily apartment communities, net of accumulated depreciation of
$235,825,752 and $227,600,092, respectively

$402,999,104$422,662,237
Cash and cash equivalents12,224,3619,645,420
Cash restricted for tenant security deposits1,332,1781,455,751
Replacement reserve escrow986,7901,361,997
Prepaid expenses and other assets9,545,96611,786,836
Investments in unconsolidated multifamily entities16,873,92417,721,959

Acquired in-place leases and tenant relationships, net of accumulated amortization
of $599,702 and $531,422, respectively

5,37773,657

Deferred expenses, net of accumulated amortization of $3,096,284 and $2,840,437,
respectively

3,210,510 4,041,785 
Total assets$447,178,210 $468,749,642 
 
LIABILITIES AND DEFICIT
 
Liabilities:
Mortgage notes payable$478,185,998$484,748,358
Revolving credit facility - affiliate8,349,422
Note payable - other1,250,000
Due to affiliates, net3,446,4601,245,147
Due to affiliate, incentive advisory fees6,634,2613,904,280
Dividend and distributions payable1,137,607837,607
Accrued expenses and other liabilities15,081,55016,030,287
Tenant security deposits1,475,298 1,651,665 
Total liabilities507,211,174 516,766,766 
 
Commitments and contingencies
 
Deficit:
Noncontrolling interest in properties1,527,431346,524
Noncontrolling interest in Operating Partnership(89,708,267)(76,785,818)

Series A 9% Cumulative Redeemable Preferred Stock, no par value, $25 stated
value, 5,000,000 shares authorized, 2,978,110 shares issued and outstanding at
December 31, 2012 and 2011, respectively

70,210,83070,210,830

Class A common stock, $.01 par value, 5,000,000 shares authorized, 0 shares
issued and outstanding at December 31, 2012 and 2011, respectively

Class B common stock, $.01 par value, 5,000,000 shares authorized, 1,406,196
shares issued and outstanding at December 31, 2012 and 2011, respectively

14,06214,062

Excess stock, $.01 par value, 15,000,000 shares authorized, 0 shares issued and
outstanding at December 31, 2012 and 2011, respectively

Accumulated deficit(42,077,020)(41,802,722)
Total deficit(60,032,964)(48,017,124)
 
Total liabilities and deficit$447,178,210 $468,749,642 
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BERKSHIRE INCOME REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the years ended December 31,
2012  2011  2010
Revenue:
Rental$72,491,955$68,980,213$62,822,629
Utility reimbursement3,254,5522,974,8582,370,379
Other3,209,041 2,908,823 2,672,364 
Total revenue78,955,548 74,863,894 67,865,372 
Expenses:
Operating19,874,49119,246,97618,170,277
Maintenance4,626,5254,681,0914,283,240
Real estate taxes7,335,1187,103,1376,207,346
General and administrative1,538,8891,686,9851,859,034
Management fees4,818,9244,563,1214,330,774
Incentive advisory fees3,113,1001,696,4852,207,795
Depreciation25,642,06427,694,55127,321,332
Interest, inclusive of amortization of deferred financing fees24,716,86426,827,06124,604,555
Amortization of acquired in-place leases and tenant relationships68,280 531,422 44,550 
Total expenses91,734,255 94,030,829 89,028,903 
Loss before equity in loss of unconsolidated multifamily entities(12,778,707)(19,166,935)(21,163,531)
Equity in loss of unconsolidated multifamily entities(268,921)(3,430,015)(4,080,225)
Loss from continuing operations(13,047,628)(22,596,950)(25,243,756)
Discontinued operations:
Income (loss) from discontinued operations(1,514,083)602,302(482,755)
Gain on disposition of real estate assets, net43,582,865 23,916,947  
Net income (loss) from discontinued operations42,068,782 24,519,249 (482,755)
Net income (loss)29,021,1541,922,299(25,726,511)
Net (income) loss attributable to noncontrolling interest in properties(9,797,304)(6,306,178)